What is crowdfinding? Crowdfunding is an alternative method of raising capital for a business, project or idea. Unlike angel investment, in which one person typically takes a larger stake in a small business, with crowdfunding an entrepreneur can attract a ‘crowd’ of people – each of whom takes a small stake in a business, by contributing towards an online funding target. Essentially, crowdfunding is the ability for a large group of people to band together and make small investments that collectively are enough to fund a startup company, project, or product.
How does crowdfunding work? Crowdfunding uses the incredible reach of the social media and the Internet to make it easy for entrepreneurs to connect with potential investors. Add to that the power of microfinance, and you have a capital raising technique with a huge potential. Crowdfunding sites are sometimes referred to as platforms because they provide a venue for all aspects of a campaign, such as creation of the public interface, campaign and project tracking, a payment mechanism and disbursement of funds.